EScroogeJr (< 20)

homeowners keep crying blue :):):)

4

My previous post drew several derogatory comments, for an obvious reason. What matters, though, is that none of the critics has even attempted to refute one of these numerical facts.

1. Homeowner equity, when measured in dollar amounts, is still near its historical maximum.

2. A 9.65 trillion equity can comfortably sustain HELOC withdrawals at the rate of 700 bln for 10 more years.

3. If people withdrew more cash from the system than they put into it, equity would have fallen faster than the asset base. Instead, it decreased by a lesser amount.

4. 84.1% of homeowners would be in the green if prices fell 20% from the peak.

Of course there was plenty of emotional outbursts. The emotions were representative of the cross-section of housing bears. Two people claimed that the grapes are sour, and two others responded with that standard crie de cour, "have pity on me, can't you see I REALLY need that sugar candy".

My previous post drew several derogatory comments, for an obvious reason. What matters, though, is that none of the critics has even attempted to refute one of these numerical facts.

Scrooge, I love your posts. Your ideas are original, contrarian (for now), well argued, and except for the Feds interest rate response, so far proving wrong. You present information that I would not have thought to consider without your posts and I am better taught for it. Thanks.

1. Homeowner equity, when measured in dollar amounts, is still near its historical maximum.

So equity has nowhere to go but down? Home value minus oustanding loan balance equals equity. Where a statistic is does not describe where it is going. The bears have been predicting 20-30% housing value drops from the peaks in 2006. These predictions certanly seem to be coming true based on the houses sitting on market for longer time periods, selling prices off 40% in some areas, and lower everywhere. Here where I live prices need to drop 50% for the average income to afford the average house. Or incomes need to go up. I see no signs of rising incomes.

2. A 9.65 trillion equity can comfortably sustain HELOC withdrawals at the rate of 700 bln for 10 more years.

If 9.65T equity and banks have written off 150 billion, it would seem there is more to go. Lets see what happens this quarter.

3. If people withdrew more cash from the system than they put into it, equity would have fallen faster than the asset base. Instead, it decreased by a lesser amount.

This is evidence that lenders recognize that equity imagined does not equal equity realized. The lenders have stopped lending more quickly than they have recalculated equity.

4. 84.1% of homeowners would be in the green if prices fell 20% from the peak.

How was that last unemployment report? How long will these homeowners stay in the green if their paychecks cannot meet their payments?

Of course there was plenty of emotional outbursts. The emotions were representative of the cross-section of housing bears. Two people claimed that the grapes are sour, and two others responded with that standard crie de cour, "have pity on me, can't you see I REALLY need that sugar candy".

Agreed. Alot of people do need that sugar candy (equity), because they are not getting it.

devoish, I would rather say that my predictions are suffering a setback, but it's too early to say they're proving wrong. Unfortunately, affordability is nowhere near, and the 8.9% drop reported by Case-Schiller is often misinterpreted as 8.9% drop in dollar terms. I will be delighted if my predictions prove wrong, if politicians prove unwilling or unable to support the bubble, and houses sell at a fair price. However, I realize that my emotions will not affect the market one way or the other, and that if I make an emotional bet, putting my stakes on the good guys from HousingPanic.com, I will surely lose money. This is why I'm actually putting my bets on the bad guys like TOL. I 'm primarily interested in TOL because of the land it owns now and because of the land that it will buy next year. If my bet is correct, the government will reinflate the bubble, and then this land will become truly golden.

Escrooge: Okay, let me just let you in on what I'm thinking over here. When I first saw you blogging, I thought you were a shill and a moron. The past few months, on your own blogs and other blogs, I've grown to respect your opinions, if not agree with them. This blog, and the previous one, is just so out-of-balance with reality, that it's not even worth discussing numbers. So instead of writing a few paragraphs with numbers, charts, and website references, I decided to be funny about it. Now, please know, if I had absolutely zero respect for you, I wouldn't even post. I make fun of all my friends - "I kid because I care." I could spend another 6 hours writing a response to this distortion of statistics, but as an actual response, the only thing I need to say is that the credit markets are frozen, banks are tightening lending standards, loans are harder to get, housing prices are continuing to head down, and the public has realized that a home that is paid off is way better than a home that is heloc'ed to the hilt (estimated 40% of all residences in the US are fully paid for).

I can go with "suffering a setback" for your predictions other than "the Gov'ts attempts to reinflate the assett bubble" for which you are dead on spot. The Gov't so far has failed. The smaller it gets, the less it can do when Cramer comes crying.

Demon, all I can say to this is I never believe in supernatural forces like fate. There is no such thing as unstoppable trend that will somehow deflate the bubble despite all the efforts of a determined government that is fully committed to reinflating it. If Bernanke lowers rates to 0% and then to -5% and then to -10%, you will forget all your bearish predictions and rush to the bank to take a mortgage for a 1-million dollar one-bedroom coop in South Bronx, because if you don't, it will cost 2 million dollars the next morning. This case is a little extreme, to be sure, but they are quite capable of it if the need arises. There is no way out for them: by allowing the bubble to deflate, they would tread on too many people's toes.

devoish, actually, the government's response has been surprisingly mild. I certainly must give credit to Bush for being far less hawkish on housing than I feared. Listen to Obama, and you'll know what a real reinflation attempt looks like.